Government regulation isn’t impeding the recovery

Equipment and software investment1 has increased more in the first three years of this economic recovery than in the comparable period of the three prior recoveries. The share of GDP going to investment in equipment and software has grown 1.6 percentage points, more than twice as large as the growth during the 1982, 1991, or 2001 recoveries. That means that this recovery is far more investment-led than the preceding ones.

The track record of business investment during this recovery is in stark contrast to claims made by business trade associations that government regulations are holding back the economy. Such claims ignore the roots of our economy’s problems (the collapse of the housing and financial sectors and inadequate demand) and contradict the fact that investments have been stronger in this recovery than in recent recoveries.

Endnotes

1. This investment category leaves out residential investment and investments in business “structures.” These types of investments are faltering as a result of the bursting of the residential and commercial real estate bubble, and not because of regulatory activity.